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Court of Appeal Clarifies Premise of Examinership

AUTHOR(S): Tony O’Grady, Julie Murphy-O’Connor, Karen Reynolds, Brendan Colgan, Niamh Counihan
PRACTICE AREA GROUP: Corporate Restructuring and Insolvency
DATE: 06.10.2017

The Court of Appeal has allowed an appeal by the Edward Holdings group of companies against a decision of O’Connor J in the High Court refusing to appoint an examiner to four of the seven group companies in respect of which an examiner was sought to be appointed.  The group, which is controlled by Gerry Barrett, owns, amongst other assets, the Meyrick and G hotels in Galway.

The Court of Appeal rejected all of the findings which underpinned the decision of the High Court to refuse to appoint the examiner, including non-disclosure and abuse of process findings.  The central issue for consideration by the Court of Appeal was the argument by the secured creditor that a settlement agreement between the group and the secured creditor in January 2017, being inconsistent with the concept of group companies seeking to have an examiner appointed to the relevant companies, should cause the court to exercise its discretion to refuse the application to appoint the examiner.

Finlay Geoghegan J and Hogan J, in separate judgments, with which Peart J agreed, both concluded that the existence of the settlement agreement was not a sufficient basis upon which to exercise their discretion to refuse the application.  Hogan J explained the position as follows.

“The fact … that an application for examinership would be inconsistent with the performance of the obligations imposed on a company under the terms of a settlement agreement cannot in itself - and I stress these words - be a dispositive consideration for a court determining whether to appoint an examiner … precisely because the entire examinership system is premised on the assumption that pre-existing commercial contracts (of whatever kind) will be overridden, varied, negated and dishonoured in the wider public interest of rescuing an otherwise potentially viable company”.

This constitutes a useful clarification of this issue in light in particular of a recent decision of the High Court which suggested otherwise  (Re JJ Red Holdings Ltd), with which Hogan J expressly disagreed.

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